The Vājasaneyi Prātiśākhya mentions that:
samāse’vagraho hrasvasamakālaḥ (5.1)
“In [the padapāṭha of] a compound, the avagraha has the same time has a hrasva vowel.”
The commentaries of Uvaṭa and Anantabhaṭṭa explain that the ‘avagraha’ is separation of a compound into its constituent elements:
Uvaṭa: dvayoḥ padayoḥ pṛthaggrahaṇo'vagrahaḥ। nānāgraha ityarthaḥ। hrasvasamakālo hrasvākṣaratulyakālo bhavati।
Anantabhaṭṭa: avagraho nāma dvayoḥ padayoḥ pṛthakkaraṇam। sa ca hrasvākṣarasamakālo bhavati।
However, this applies to the padapāṭha and not to the saṃhitāpāṭha.
Nowadays, the avagraha sign is used to show what is called akārapraśleṣa.
In Vedic saṃhitāpāṭha or in laukika poetry, the avagraha is not considered a syllable for prosodic purposes.
For more on this, please refer the entry on अवग्रह (avagraha) in A Dictionary of Sanskrit Grammar by K.V. Abhyankar